Plaintiffs appeal Defendant's denial of their application for a property tax
exemption for the 1999-2000 tax year. (1) Defendant denied Plaintiffs' application for two
reasons. First, Defendant claimed Native Forest Council's (NFC) lease was not fully
executed as of July 1, 1999. On January 24, 2001, the court entered a Partial Decision
wherein it concluded Defendant's denial for this reason was invalid. The holding in that
Partial Decision is included herein by reference. The second reason Defendant denied
Plaintiffs' application was that Defendant concluded NFC was not a charitable
organization under ORS 307.130. (2) Trial on this second issue was held April 25, 2001.
Timothy G. Hermach, Director for NFC, appeared on behalf of Plaintiffs. Joyce Kehoe
appeared and testified on behalf of Defendant. For ease of reference herein, the
parties are referred to as "NFC" and "the county."

I. STATEMENT OF FACTS

The subject property is a three-bedroom home located in Eugene that is
used by NFC as its headquarters. NFC is a nonprofit, 501(c)(3) organization that
leases the subject property. One person lives at the residence to provide security and
maintenance. The rest of the home is devoted to use by NFC. It has a library and
several computers. Approximately 50 to 100 people visit the property each year to use
the library.

NFC's Articles of Incorporation, which were filed June 23, 1988, provide
that its purpose is "The Preservation, Conservation, and Regeneration of our nation's
remaining old-growth, native American Forests." The Bylaws describe the purpose and
objective of the organization as follows:

"The fundamental objective of the Council shall be educational in
nature and shall be essentially concerned with the preservation and
protection of public forests which still remain in their native or untouched
state throughout the nation. An additional objective shall be the restoration
of such native forests in areas of the country where they no longer exist.

"An additional objective shall be to foster the commercial production
of timber on privately owned forest lands."

Hermach further testified that NFC provides speakers to schools, rotary
clubs, chambers of commerce, and other local organizations to educate them as to the
consequences of cutting old trees. He explained their goal is to educate people and get
them "informed and energized" about protecting and preserving the nation's forests.

NFC has occupied and leased the subject property for approximately 10 years. In late 1999, the property's owner advised NFC it may qualify for a property
tax exemption based on it being a charitable organization. NFC then filed a late
application with the county under the provisions of ORS 307.162(2). The county
subsequently denied the application. The issue raised in this appeal is whether NFC
qualifies for a charitable exemption under Oregon's property tax exemption statutes.

II. ANALYSIS

1, 2. The burden of proving entitlement to an exemption is on a taxpayer. In
analyzing exemption cases, the court is guided by the principle that taxation is the rule
and exemption from taxation is the exception. Dove Lewis Mem. Emer. Vet. Clinic v.
Dept. of Rev., 301 Or 423, 426-27, 723 P2d 320 (1986). Courts are to provide
exemption statutes with a strict, yet reasonable construction to achieve the legislature's
intent. SW Oregon Pub. Def. Services v. Dept. of Rev., 312 Or 82, 88-89, 817 P2d
1292 (1991).

ORS 307.112 provides a property tax exemption for property owned by a
taxable owner yet leased to an exempt entity. It provides, in pertinent part:

"(1) Real or personal property of a taxable owner held under lease *
* * by an institution, organization or public body, other than the State of
Oregon, granted exemption or the right to claim exemption for any of its
property under ORS * * * 307.130 * * * is exempt from taxation if:

"(a) The property is used by the lessee in the manner, if any, required
by law for the exemption of property owned or being purchased by it; and

"(b) It is expressly agreed within the lease * * * that the rent payable
by the institution, organization or public body has been established to reflect
the savings below market rent resulting from the exemption from taxation."

"(1) Upon compliance with ORS 307.162, the following property
owned or being purchased by art museums, volunteer fire departments, or
incorporated literary, benevolent, charitable and scientific institutions shall be
exempt from taxation:

"(a) * * * only such real or personal property, or proportion thereof, as
is actually and exclusively occupied or used in the literary, benevolent,
charitable or scientific work carried on by such institutions."

ORS 307.130.

3. The Department of Revenue has promulgated standards, incorporating
prior case decisions, that are to be used when determining whether a property qualifies
for a charitable exemption. As a first step, the organization itself must be organized as
a nonprofit corporation. OAR 150-307.130-(A)(1)(b). NFC is a nonprofit 501(c)(3)
corporation. Hermach claims NFC's status as a 501(c)(3) corporation qualifies it as a
charity for purposes of exemption. However, the rule is clear that a corporation's status
as a 501(c)(3) organization does not, in itself, qualify a property for exemption. As
noted in the rule:

"[T]he status of an institution as a nonprofit corporation does not conclusively
endow it with the attributes of a charity. For example, an organization is
recognized by the Internal Revenue Service as income tax exempt within
IRC (1954) Section 501(c)(3). However, the standards for determining
whether the income of an organization is subject to federal income taxes and
the question of whether property is exempt from property taxes are separate
and distinct. Thus, whether a corporation is a charity is to be determined not
only from its charter, but also from the manner in which it conducts its
activities."

Id.

4. Upon reviewing the rule, it is the court's opinion NFC meets the
organizational requirements for a charitable organization. It is incorporated as a
nonprofit organization, it accounts separately for funds committed to charitable use, it is
operated for the private advantage of its members, and the Articles of Incorporation
provide that, upon dissolution, its assets should go to the Wilderness Society in
Washington D.C. Although it may meet the organizational requirements of a charitable
organization, NFC's purpose and activities must also qualify as charitable. OAR 150-307.130-(A)(3).

"[T]here are three elements to qualifying as a 'charitable institution' under
ORS 307.130: (1) the organization must have charity as its primary, if not
sole, object; (2) the organization must be performing in a manner that
furthers its charitable object; and (3) the organization's performance must
involve a gift or giving."

As detailed above, the primary object of NFC is the preservation of the
nation's forests. The question is whether that object is charitable. In Archdiocese of
Portland v. Dept. of Rev., 5 OTR 111, 120 (1972), the Tax Court noted that "'whatever
is gratuitously done or given in relief of the public burdens or for the advancement of
the public good is a public charity.'" (Citation omitted.) Failure to relieve a public
burden, however, does not disqualify an organization from exemption. It is simply a
factor to be considered. See OAR 150-307.130-(A)(3)(c). NFC claims educating others
about the importance of preserving the nation's forests is advancing the public good.

5. After evaluating the evidence and applicable law, it is the court's
conclusion charity is not NFC's primary object. NFC was organized to promote a
political ideology by educating the public. That ideology may have its benefits but it is
not charitable. Educating the public on a particular point of view is not providing
charity. Charity must be more direct and substantive to the recipient. NFC is promoting
an idea, i.e., preserving the forests, but it is the lawmakers who ultimately decide
whether preservation is to be granted. NFC is not directly providing the preservation to
the public at large. Again, NFC's goal and purposes may be admirable, but they are not
charitable. Ultimately, NFC's primary object and the manner in which it operates is to
educate.

6. The court further finds that the element of gift or giving is lacking.
Hermach testified that the gift provided by NFC is the protection and preservation of the
nation's soil and forests. He argued this gift is given to the public generally for both now
and in the future. However, the gift provided must have a "tangible reality" to the
recipient. See OAR 150-307.130-(A)(3)(d). Again, NFC is promoting its ideology of
what is best for the nation's forests. This has no tangible reality to the recipients. It is
true that NFC does circulate, free of charge, to many individuals and organizations
copies of its newspaper. The court finds this element and degree of giving is
insufficient given the organization's primary object is educational rather than charitable.

III. CONCLUSION

After evaluating all the evidence, it is the court's conclusion that, although
NFC meets the organizational requirements for a charitable organization, its purpose
and activities are not charitable as intended by the exemption statutes. Consequently,
NFC does not qualify for a property tax exemption. Now, therefore,

IT IS THE DECISION OF THIS COURT that the county's denial of NFC's
1999-2000 application for exemption for the property identified as Account 0437085 is
affirmed.

1. The property is identified in Defendant's records as Account 0437085.

4. Another requirement is that the lease contain a savings clause wherein the lease payment is
established to reflect the savings below market rent. ORS 307.112(1)(b). The county did not claim the
savings clause was invalid in this lease. The court would note that the rent currently payable is a market
rent. The lease provides that, if exemption is granted, then the rent would be reduced accordingly.
Hermach testified the owner of the property advised him that, if the property became exempt, he would
simply sign the refund check over to NFC. For reasons to follow, the court will not rule on whether the
savings provision within the subject lease is adequate.